The rental of video tape recordings has greatly expanded in recent years. Although the industry has been very successful from the standpoint of increased demand of rental tapes, several problems have developed which might greatly reduce the industry's potential. The first and foremost problem from the retailers point of view is that of product theft from the distribution network by employees and customers. A stolen rental tape may be illegally reproduced many times and then illegally rented, thus depriving the proper owners of the rights involved of very significant income. Acording to one report, theft in 1985 amount to $14,000,000 in connection with one retail outlet chain alone.
Additionally, there exists the case where a customer does not return the video tape. Some rental outlets pay private security firms a fee for each tape recovered. It is believed that theft losses of hundreds and in some cases thousands of dollars per month per store may occur.
A second major problem for the retail rental outlet is the need for additional tapes to rent. This is a two-pronged problem. First, there is an overall shortage of different recordings available and, second, there is a delay between theatrical release and video release. Because of the tape pirating problem, the producers of new releases feel that they are not receiving a fair return on their product. They have little incentive to fill the industry's needs for new titles when they know that each tape sold into the rental industry will reduce their traditional markets.
Another element of the problem is the cost of video tapes. Normally, a rental outlet must buy the tapes and the cost varies between $40 and $80 each when new. Because of this, many retailers resort to buying used tapes on the open market for lesser amounts. This, in turn, is an incentive for pirates to satisfy this demand. It is believed that many of the studios and independent producers of video tapes would be happy to fill the need for additional product if there were some way for them to participate in the revenues generated by the rental of their product.
Thus, the need exists for an improved system for controlling the rental of video tapes. Such a system must reduce the theft and pirating problem. Also, it is desirable that such a system allow the producers of video tapes to participate more equitably in the revenue generated from renting tapes. Further, it is desirable that retail rental outlets be able to provide their service with a minimum investment of initial capital to participate in the business.